EUR/GBP erases early gains, turns negative at 0.8520

The EUR/GBP cross erased all of its early gains to 0.8580 and dropped below 0.8500 handle before managing to recover some lost ground to currently trade around 0.8515-20 band. 

During early European trading session, increasing prospects of monetary easing by the Bank of England attracted fresh selling pressure around the British Pound. However, a bout of short-covering rally around the GBP/USD pair helped the EUR/GBP cross to erase all of its early gains and move into negative territory for third consecutive session.

From technical perspective, near-term upside for the cross remained capped at 0.8600 handle and a follow through selling pressure below 0.8500 level is likely to trigger a near-term corrective move. However, any sharp downslide could be limited as we head towards the key event risk, BOE monetary policy meeting on Thursday. 

Technical levels to watch

On a sustained weakness below 0.8500-0.8490 immediate support, the pair seems vulnerable to break below 0.8400 handle and test 0.8385-80 support marking 23.6% Fibonacci retracement level of 0.7600-0.8617 Brexit-led up-swing. Meanwhile on the upside, 0.8600 remains immediate strong hurdle, which if conquered seems to pave way for an immediate up-move towards 0.8650 resistance before extending its upward trajectory beyond 0.8700 handle, towards August 2013 highs resistance near 0.8760-65 region.